Indian Government makes Another Move to Attract Foreign Firms to Enter Defense Sector

Published By : 03 Jun 2015 |Published By : QYRESEARCH

The Indian government is trying to lure private companies to the defense sector. In its latest attempt to attract private capital in the sector, the government has withdrawn the customs and excise duty exemptions enjoyed by the state-owned companies involved in the manufacturing of the defense goods. The latest move will affect the Ordnance Factory Board as well as the public sector organizations in defense sector. According to the Commence and Industry Ministry, this has been done to provide equal opportunities to the private players who are submitting their quotes in the open bids. Earlier, the state-owned companies used to quote lower rates due to the customs and excise duty exemption.

The private and the foreign companies such as Airbus, Boeing, BAE Systems, and Lockheed Martin have been asking the government to scrape off the duty exemptions for long. The move is expected to attract other foreign and private original equipment manufacturers to the country’s defense sector. The withdrawal of exemption will help the smaller private players in India to become contractors and sub-suppliers for larger military contracts. The industry analysts have welcomed the move. However, they point out that the Ministry of Defense needs to consider the benefit the foreign companies get by not paying any import duties for equipment they bring in the country. India’s defense and aerospace market is very lucrative for the market players as the country is the highest importer of defense items across the globe. The government has opened the defense sector for private players by raising the share of foreign direct investment up to 49%.